EX-99.1 2 k04759exv99w1.htm PRESS RELEASE DATED APRIL 27, 2006 exv99w1
 

EXHIBIT 99.1
     
(FLAGSTAR LOGO)
  NEWS RELEASE
FOR MORE INFORMATION, CONTACT:
Paul D. Borja
Executive Vice President / CFO
(248) 312-2000

FOR IMMEDIATE RELEASE
FLAGSTAR REPORTS 2006 FIRST QUARTER RESULTS
TROY, Mich. (April 27, 2006) — Flagstar Bancorp, Inc. (NYSE:FBC), today reported first quarter 2006 net earnings of $18.9 million, or $0.29 per share — diluted.
For the first quarter ended March 31, 2005, net earnings were $19.8 million, or $0.31 per share — diluted.
Highlights from the quarter include:
•   Annualized return on average equity of 9.7%
 
•   Deposit growth of 3%, or 12% annualized
 
•   The opening of our 141st banking center
 
•   Loan production of $4.7 billion, including $4.3 billion in residential mortgage loans
 
•   Decline in loan delinquency rate to 1.01% from 1.10% at December 31, 2005
 
•   Gain from loan sales of 33 basis points on sales of $3.9 billion in loans, as compared to a gain of 14 basis points on sale of $5.4 billion in loans in Q1 2005
 
•   Loans serviced for others of $29.2 billion
 
•   Servicing portfolio sales of $2.4 billion as compared to $4.8 billion in Q4 2005 and $2.5 billion in Q1 2005
Balance Sheet and Capital Adequacy
Consolidated asset balance was $15.1 billion at March 31, 2006 as compared to $15.1 billion at December 31, 2005 and $14.3 billion at March 31, 2005. With a core capital ratio of 6.3% and risk-based capital ratio of 11.2%, Flagstar Bank, our wholly-owned subsidiary, was considered “well-capitalized” for regulatory purposes.
Net Interest Margin
The net interest margin for the first quarter of 2006 was 1.72%, as compared to 1.73% for the fourth quarter of 2005 and 2.07% for the first quarter of 2005. “We have worked hard to keep our net interest margin relatively stable in the first quarter of 2006 as compared to the fourth quarter of 2005 despite a flat yield curve environment and increasing deposit rates,” commented Mark Hammond, President and CEO of Flagstar Bancorp.
Retail Banking Operations
Flagstar Bank had 141 branches in operation at March 31, 2006 and expects to open approximately 11 more branches by the end of 2006. Banking operations contributed

 

 

approximately $22.6 million of before-tax earnings during the quarter. These results were up by 18.3% from the fourth quarter of 2005, and down by 25.4% from the first quarter of 2005
Mortgage Banking Operations
Flagstar’s gain on sale spread decreased to 33 basis points during the quarter ended March 31, 2006 as compared to 48 basis points recorded during fourth quarter last year. However, it increased 19 basis points as compared to 14 basis points gain on sale for the quarter ended March 31, 2005.
At March 31, 2006, Flagstar’s mortgage servicing portfolio totaled $29.2 billion with a weighted average service fee of 34.8 basis points, a slight decrease from $29.6 billion at December 31, 2005 with a weighted average servicing fee of 34.7 basis points. During the first quarter of 2006, Flagstar sold $2.4 billion of servicing as compared to $4.8 billion during the fourth quarter of 2005 and $2.5 billion during the first quarter of 2005.
The capitalized value of Flagstar’s servicing portfolio was $321 million, or 1.10% of the outstanding balance of loans serviced for others, at March 31, 2006 as compared to $316 million, or 1.06%, at December 31, 2005. The estimated market value of the portfolio was $442.6 million at March 31, 2006 and $421.1 million December 31, 2005.
Net income was affected by a $3.6 million net loss on securities available for sale resulting from an impairment in the fair value of the residual interest recorded as part of the Company’s $600 million HELOC securitization in December 2005. The impairment arose because of the increase in prepayment speed in the first quarter of 2006 when compared to the prepayment speed observed at the end of 2005.
Asset Quality
Non-performing loans totaled $58.0 million at March 31, 2006, a decrease of $6.5 million as compared to $64.5 million recorded at March 31, 2005. Delinquencies as a percent of loans held for investment also decreased to 1.01% at March 31, 2006, from 1.10% at December 31, 2005. At March 31, 2006, 91.9% of non-performing loans were secured by first or second mortgages on single family homes. Single-family residential first mortgage loans held by Flagstar for investment at March 31, 2006 had an average FICO credit score of 720 and an average loan-to-value ratio of 71%.
As Previously Announced
The Company’s quarterly earnings conference call will be held on Friday, April 28, 2006 from 11 a.m. until noon (Eastern).
Questions for discussion at the conference call may only be submitted in advance by email to investors@flagstar.com.
The conference call and accompanying slide presentation will be webcast live on the Investor Relations section of the Company’s website, www.flagstar.com.
To listen by telephone, please call at least 10 minutes prior to the start of the conference call at (913) 981-4904 or toll free at (800) 811-8830, passcode: 9299734.
Flagstar Bancorp, which has $15.1 billion in total assets, is the largest publicly held savings bank headquartered in the Midwest. Flagstar currently operates 143 banking centers located throughout southern Michigan, Indiana and Georgia and operates 97 loan centers in 26 states.

 

 

Flagstar Bank originates loans nationwide and is one of the nation’s top 30 originators of residential mortgage loans.
The information contained in this release is not intended as a solicitation to buy Flagstar Bancorp, Inc. stock and is provided for general information. This release contains certain statements that may constitute “forward-looking statements” within the meaning of federal securities laws. These forward-looking statements include statements about the Company’s beliefs, plans, objectives, goals, expectations, anticipations, estimates, and intentions, that are subject to significant risks and uncertainties, and are subject to change based upon various factors (some of which may be beyond the Company’s control). The words “may,” “could,” “should,” “would,” “believe,” and similar expressions are intended to identify forward-looking statements.

 

 

Flagstar Bancorp, Inc.
Summary of Selected Consolidated Financial Data
(in thousands, except share data)
(unaudited)
Summary of the Consolidated Statements of Earnings
                         
    At or for the three months ended  
    March 31,     December 31,     March 31,  
    2006     2005     2005  
     
Interest income
   $ 191,299     $ 194,035     $ 163,125  
Interest expense
     132,624       132,191       97,916  
     
Net interest income
     58,675       61,844       65,209  
Provision for losses
     4,063       6,036       6,246  
     
Net interest income after provision
     54,612       55,808       58,963  
Loan fees and charges, net
     1,611       3,180       2,622  
Deposit fees and charges
     4,811       4,585       3,577  
Loan servicing fees, net
     4,355       3,061       5,945  
Gain on loan sales, net
     17,084       14,644       9,577  
Gain on MSR sales, net
     8,586       11,155       4,248  
Net loss on securities available for sale
     (3,557 )     —       —  
Other income
     9,731       11,625       9,593  
Operating expenses
                        
Compensation and benefits
     39,873       37,475       37,556  
Commissions
     16,967       17,912       21,080  
Occupancy and equipment
     16,908       17,737       16,650  
General and administrative
     9,871       11,714       11,440  
Other
     5,886       7,220       6,042  
Capitalized direct cost of loan closing
     (21,435 )     (23,196 )     (29,045 )
     
Earnings before federal income tax
     29,163       35,196       30,802  
Provision for federal income taxes
     10,253       12,369       11,024  
     
Net earnings
   $ 18,910     $ 22,827     $ 19,778  
     
Basic earnings per share
   $ 0.30     $ 0.36     $ 0.32  
Diluted earnings per share
   $ 0.29     $ 0.36     $ 0.31  
Dividends paid per common share
   $ 0.15     $ 0.15     $ 0.25  
Interest rate spread
     1.57 %     1.72 %     1.90 %
Net interest margin
     1.72 %     1.73 %     2.07 %
 
                        
Return on average assets
     0.50 %     0.59 %     0.57 %
Return on average equity
     9.73 %     12.06 %     10.69 %
Efficiency ratio
     67.20 %     62.55 %     63.24 %
 
                        
Average interest earning assets
   $ 13,845,517     $ 14,270,646     $ 12,748,125  
Average interest paying liabilities
   $ 13,591,084     $ 14,106,712     $ 12,333,303  
Average stockholders’ equity
   $ 777,620     $ 757,235     $ 739,784  
Equity/assets ratio (average for the period)
     5.14 %     4.86 %     5.36 %
 
                        
Ratio of charge-offs to average loans held for investment
     0.15 %     0.10 %     0.17 %
Summary of the Consolidated Statements
                         
    March 31,     December 31,     March 31,  
    2006     2005     2005  
     
Total assets
   $ 15,051,458     $ 15,075,430     $ 14,285,343  
Loans held for sale
     2,442,616       1,773,394       1,980,854  
Loans held for investment, net
     9,794,612       10,537,331       11,158,390  
Allowance for loan losses
     39,520       39,140       39,272  
Servicing rights
     321,167       315,678       215,043  
Deposits
     8,208,435       7,979,000       7,744,681  
FHLB advances
     3,844,000       4,225,000       4,738,000  
Repurchase agreements
     1,103,536       1,060,097       —  
Stockholders’ equity
     783,084       771,883       737,315  
 
                        
Other Financial and Statistical Data:
                        
 
                        
Equity/assets ratio
     5.20 %     5.12 %     5.16 %
Core capital ratio
     6.33 %     6.26 %     6.24 %
Total risk-based capital ratio
     11.20 %     11.09 %     10.99 %
 
                        
Book value per share
   $ 12.33     $ 12.21     $ 11.89  
Shares outstanding
     63,488       63,208       62,006  
 
                        
Loans serviced for others
   $ 29,242,906     $ 29,648,088     $ 22,518,180  
Weighted average service fee (bps)
     34.8       34.7       34.4  
Value of servicing rights
     1.10 %     1.06 %     0.95 %
 
                        
Allowance for loan losses to non performing loans
     68.2 %     60.7 %     68.5 %
 
                        
Allowance for loan losses to loans held for investment
     0.40 %     0.37 %     0.35 %
Non performing assets to total assets
     1.00 %     0.98 %     0.92 %
 
                        
Number of bank branches
     141       137       123  
Number of loan origination centers
     97       101       109  
Number of employees (excluding loan officers & account executives
     2,421       2,405       2,404  
Number of loan officers and account executives
     594       689       838  

 

 

Flagstar Bancorp, Inc.
Loans Held for Investment
(in thousands)
(unaudited)
                                                 
    March 31, 2006     %     December 31, 2005     %     March 31, 2005     %  
     
First mortgage loans
   $ 7,309,685       74.3     $ 8,248,897       78.0     $ 9,155,588       81.8  
Second mortgage loans
     762,918       7.8       700,492       6.6       234,549       2.1  
Commercial real estate loans
     1,091,179       11.1       995,411       9.4       815,780       7.3  
Construction loans
     63,998       0.7       65,646       0.6       64,926       0.6  
Warehouse lending
     187,610       1.9       146,694       1.4       182,541       1.6  
Consumer loans
     406,267       4.1       410,920       3.9       735,627       6.5  
Non-real estate commercial
                                                
loans
     12,475       0.1       8,411       0.1       8,650       0.1  
     
Total loans held for investment
   $ 9,834,132       100.0     $ 10,576,471       100.0     $ 11,197,661       100.0  
     
Deposit Portfolio
(in thousands)
(unaudited)
                                                 
    March 31, 2006     December 31, 2005     March 31, 2005  
    Balance     Rate     Balance     Rate     Balance     Rate  
    ($ '000)     (%)     ($ '000)     (%)     ($ '000)     (%)  
             
Demand deposits
   $ 355,487       0.64     $ 374,816       0.60     $ 339,168       0.73  
Savings deposits
     207,131       1.41       239,215       1.52       561,562       1.96  
Money market deposits
     661,067       3.24       781,087       2.98       989,591       2.61  
Certificates of deposits
     3,687,232       4.25       3,450,450       3.94       2,450,618       3.54  
             
Total retail deposits
     4,910,917       3.74       4,845,568       3.41       4,340,939       2.91  
 
                                                
Municipal deposits
     1,688,691       4.75       1,353,633       4.30       1,647,247       2.95  
Wholesale deposits
     1,608,827       3.48       1,779,799       3.42       1,796,495       3.18  
             
Total deposits
   $ 8,208,435       3.89     $ 7,979,000       3.56     $ 7,784,681       2.98  
             
Gain on Loan Sales
(in thousands)
(unaudited)
                         
    For the quarter ended  
    March 31, 2006     December 31, 2005     March 31, 2005  
     
Net gain on loan sales
   $ 17,084     $ 14,644     $ 9,577  
Plus: FASB 133 adjustment
     (5,381 )     4,976       (3,135 )
Plus: secondary market reserve
     1,006       4,932       1,181  
     
Gain on loan sales
   $ 12,709     $ 24,552     $ 7,623  
     
Loans sold
   $ 3,894,070     $ 5,138,506     $ 5,438,047  
     
Sales spread
     0.33 %     0.48 %     0.14 %
     
Asset Quality & Reserves
(in thousands)
(unaudited)
                                                 
    Delinquencies at  
    March 31,             December 31,             March 31,        
Days delinquent   2006     %     2005     %     2005     %  
     
30
   $ 24,462       24.5     $ 30,972       26.7     $ 36,727       33.6  
60
     17,244       17.3       20,456       17.7       15,125       13.9  
90
     56,469       56.7       61,816       53.3       52,320       47.9  
matured — delinquent
     1,501       1.5       2,650       2.3       5,029       4.6  
     
Total
   $ 99,676       100.0     $ 115,894       100.0     $ 109,201       100.0  
     
Investment loans
   $ 9,834,132             $ 10,576,471             $ 11,195,408          
     
Delinquency %
     1.01 %             1.10 %             0.98 %        
     
                         
    Non-Performing Loans and Assets at  
    March 31,   December 31,   March 31,
    2006   2005   2005
     
Non-performing loans
   $ 57,970     $ 64,466     $ 57,349  
As a percent of investment loans
     0.59 %     0.62 %     0.51 %
Non-performing assets
   $ 150,975     $ 146,967     $ 130,926  
As a percent of total assets
     1.00 %     0.98 %     0.92 %
Loan Originations
(in millions)
(unaudited)
                                                 
                    For the quarter ended                    
Loan type   March 31, 2006     %     December 31, 2005     %     March 31, 2005     %  
 
Residential mortgage loans
   $ 4,348       93.0     $ 5,621       92.9     $ 7,213       95.3  
Consumer loans
     180       3.8       230       3.8       248       3.3  
Commercial loans
     146       3.2       202       3.3       110       1.4  
     
Total loan production
   $ 4,674       100.0     $ 6,053       100.0     $ 7,571       100.0